powder
May 12, 2020

Dairy Coalition Warns EU Not to Stockpile Products to Distort Prices

 |  By: Anna-Lisa Laca

The European Union (EU) is preparing for government-financed intervention purchases of skim milk powder (SMP) and butter. The last time the EU created “intervention stocks” they served as a wet rag on global dairy prices for several years. This time, dairy farmers and processors in key dairy-producing countries around the world are calling on the EU to avoid these market-distorting practices. 

A coalition of dairy organizations from Argentina, Brazil, Chile, Costa Rica, Ecuador, Guatemala, Mexico, Paraguay, Uruguay and the United States joined together this week and urged the EU not to repeat the inventory-building and extended market-price suppression it engaged in a few years ago.

“The European Commission must avoid dumping government-purchased SMP and butter on the world market and implementing policies that undermine global dairy markets under the guise of protecting its farmers,” the group said in a joint statement. “The EU’s market-distorting practices are harmful enough during normal operations. If used in the wake of the COVID-19 pandemic, which has dramatically eroded dairy prices, they would be disastrous to the world dairy market by prolonging the current crushing economic conditions. Global buyers of SMP and butter will have little incentive to bid up prices as long as the EU Government holds significant quantities in Intervention.”

The EU exporting large quantities of government purchased products below market prices will inevitably prolong the challenges facing the dairy industry around the world (globally?). The EU intervention program would artificially distort prices for an extended period and displace commercial competition just as the world begins to recover from the immediate impacts of the COVID-19 pandemic. 

“It’s critical that the EU act now to put a long-term plan into place regarding how to handle its government-incentivized stockpiling, given that the EU has a demonstrated history of dumping intervention purchases in a way that disrupts the world dairy market,” the group said. “The EU intervened in 2016-17 and held the equivalent of 16 percent of the global SMP market in government storage. It subsequently released the product on the world market over the next two years, unfairly undercutting international prices and harming the global dairy industry.”

Instead of intervention, the groups urge the EU to increase demand and ask its producers to curb supply. 

“Farmers and dairy processors in our countries and many others around the globe are already in the fight of their lives, working hard every day to help keep the world well-nourished through this crisis. We are all dealing with great enough challenges already in our own markets. If the EU does not commit to avoid distorting global markets by dumping their excess intervention stocks onto the world market just as dairy sectors begin to recover, the more farmers and processors outside the EU could be forced to close their doors,” they said. “We encourage the EU to implement policies that support greater utilization of dairy products with the goal to increase consumption, particularly with the consumers impacted most by the covid-19 outbreak.”

The groups joining the National Milk Producers Federation, International Dairy Foods Association and the U.S. Dairy export council include:

Argentina

Sociedad Rural Argentina (SRA)

Centro de la Industria Lechera Argentina (CIL)

Brazil

Sindicato da Indústria de Laticínios e Produtos Derivados no Estado São Paulo (SINDLEITE)

Central America

Federación Centroamericana de Productores Lácteos (FECALAC)

Chile 

Federación de Productores de Leche (FEDELECHE) 

Costa Rica

Cámara Nacional de Productores de Leche de Costa Rica (CNPL)

Ecuador 

Centro de la Industria Láctea del Ecuador (CIL)

Asociación de Ganaderos (AGSO)

Guatemala

Cámara de Productores de Leche (CPL)

Mexico

Asociación Mexicana de Productores de Leche, A.C. (AMLAC)

Cámara Nacional de Industriales de la Leche de México (CANILEC)

Confederación Nacional de Organizaciones Ganaderas (CNOG)

Paraguay

Cámara Paraguaya de Industriales Lácteos (CAPAINLAC)

Uruguay

Cámara de la Industria Láctea del Uruguay (CILU)